Goldman Tops M&A Advisers After Blockbusters


For the past two years, investment bankers who rely on fee income from mergers and acquisitions have talked optimistically in January only to see deal volume fall, or flat line.

This year may finally be different. Companies have been hiring bankers and M&A lawyers to assess an increasing number of opportunities. Contracts for early-stage M&A work worldwide jumped 17 percent in the fourth quarter, a sign 2014 will pick up, says Matthew Porzio, vice president of M&A strategy and product marketing at New York–based Intralinks Inc., which tracks early activity.

Goldman Sachs topped Bloomberg Markets’ annual ranking of M&A advisers in 2013 with an estimated $1.23 billion in fees, the magazine will report in its April issue. Bloomberg changed its methodology in calculating fees to reflect deals that were completed last year, rather than those that were announced.

The New York bank represented Vodafone Group on the U.K. telecom company’s sale of its stake in a wireless joint venture to Verizon Communications for $130 billion. The sale closed on Feb. 21 -- giving Goldman a head start in the 2014 ranking.

Gregg Lemkau, Goldman’s global co-head of M&A, predicts deal volume will improve this year because companies will make more acquisitions in the $1 billion–to–$5 billion range. Deals of that size fell 13 percent to $743 billion in 2013 -- overshadowed by blockbusters.

Among the megadeals that closed last year, investors 3G Capital and Berkshire Hathaway Inc. acquired ketchup maker H.J. Heinz Co. for $27.4 billion, and Dell Inc. founder Michael Dell pulled off a management-led buyout of the computer maker for $24.9 billion.

Private Equity

All told, M&A fees for completed deals in 2013 were $16.5 billion, compared with $17.1 billion for deals announced in 2012. Deal volume, which reflects completed deals for both years, rose 0.1 percent to $2.01 trillion.

Lemkau says private-equity firms sold companies into the public market and weren’t aggressively acquiring much in 2013. He expects that to change. Leveraged buyouts, often in the $1 billion–to–$5 billion range, could liven up this year’s scene, he says.

“There is a substantial amount of private-equity capital that needs to go to work,” he says.

Adding to bankers’ confidence, financing is cheap and available, says Chris Ventresca, global co-head of M&A at JPMorgan Chase. The New York–based bank was No. 3 in the Bloomberg ranking, with an estimated $1.13 billion in fees, just behind Morgan Stanley, with an estimated $1.17 billion. Companies planning an acquisition are another year into an economic recovery and see less risk, Ventresca says.

‘Safe Bet’

“Deals will be up 10 to 15 percent this year,” he predicts. “That’s a safe bet. Where there is less risk, companies are more confident in stepping out.”

Companies that made acquisitions within their industries have seen their share prices rise, providing further motivation to merge, says Steve Baronoff, head of global M&A at Bank of America Merrill Lynch, which was fourth in the ranking, ahead of Barclays Capital. Thermo Fisher Scientific Inc. shares gained 4.1 percent on April 16, the day after it announced it was acquiring Life Technologies Corp.

Baronoff expects that kind of reaction to spur more alliances, particularly in telecom, health care and consumer products.

Buying Opportunity

The environment for strategic deals is better than in recent years, says Michael Boublik, chairman of M&A, Americas, at Morgan Stanley. However, he says, it’s unrealistic to expect dealmaking to come roaring back. Without stronger growth, it can be tough to get a sufficient return for some would-be buyers to justify pursuing certain deals, Boublik says.

The stock market’s dip in early 2014 may encourage acquisitions by making companies cheaper, says James Woolery, chairman-elect of corporate law firm Cadwalader, Wickersham & Taft LLP.

“The sell-off is a bit of an opportunity because there are some potential buyers who thought targets were too expensive,” Woolery says.

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